Chow Tai Fook Sees Steady Growth for Affordable Jewelry in China

Chow Tai Fook Jewelry Group Ltd. (1929) expects sales of its accessibly priced gold rings and bracelets to continue to rise as it opens more than 500 stores in the next four years in greater China even as economic growth slows.

“We’re still quite positive,” Alan Chan, the Hong Kong- based jeweler’s director of group branding, said in an interview in Paris. “Jewelry demand is growing steadily.”

China is targeting 7.5 percent economic expansion for 2012, slower than an 8 percent goal in place since 2005, as Europe’s debt crisis and a sluggish recovery in the U.S. hold back demand for goods from the world’s largest exporter. Higher-end luxury- sales growth in China has eased to as little as 15 percent from 70 percent as consumers switch to cheaper items, Swatch Group AG (UHR) Chief Executive Officer Nick Hayek said March 1.

Chow Tai Fook, the world’s largest listed jewelry retailer, gets more than 70 percent of sales from products in a price range of HK$2,000 ($250) to HK$100,000, according to Chan. The items “are things that the general public can afford, and we are going after this segment,” he said.

More than half the jeweler’s sales come from gold products, Chan said. The precious metal is “heavily tied in” to Chinese culture and consumers buy it “for fortune, for transfer of wealth to the next generation and gifting,” he said. “Demand is very stable in that respect.”

Market Growth

China, the world’s second-largest gold jewelry market, may boost retail consumption of the precious metal by 35 percent in 2012 to a record as incomes rise and urbanization continues, according to researcher Frost & Sullivan. Chan spoke March 6 at an event to promote Chinese fashion, art, dance, photography, music and jewelry during Paris fashion week.

Chow Tai Fook, which has more than 1,500 watch and jewelry outlets in 320 cities in China as well as in Hong Kong and Macau, plans to open as many as 200 jewelry sales points a year through 2015, Chan said. “We have at least 100 cities to go” in the country, he said. The company aims to have more than 2,000 jewelry outlets by 2016.

The retailer’s 60 stores in Hong Kong account for about one-third of sales, with half of those made to shoppers from mainland China, Chan said. Chow Tai Fook will expand in third- and fourth-tier cities as well as “go deeper” into large metropolises as it opens more free-standing stores, he said.

“In Shanghai, if we can match our sales in Hong Kong, it would be a huge potential,” Chan said.

To contact the reporter on this story: Andrew Roberts in Paris at aroberts36@bloomberg.net

To contact the editor responsible for this story: Sara Marley at smarley1@bloomberg.net

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